If you are a U.S. citizen, retired and living abroad and receive income from any source, including but not limited to Annuities, Social Security, Railroad Benefits, Pension or Retirement plan, you probably need to file. Talk to your tax advisor to determine your filing obligation.

You may receive an IRS notice. Penalties and interest on any unpaid taxes could be assessed.

You can either file your overdue tax returns separately or under the Streamlined Filing Procedures. Use of the Streamlined Procedures is usually recommended as you can file 3 years of tax returns and 6 years of financial accounts disclosure all at once. Generally, penalties are waived but interest is calculated on any tax liability.

If you are a U.S citizen or a resident alien and working abroad, you may be eligible to claim the Foreign Earned Income Exclusion. The IRS allows a U.S. person to claim the exclusion against their foreign earned income up to the threshold limit of $104,100 for 2018. In order to qualify for FEIE, an individual needs to meet either of the one following tests:

Bona Fide Residency Test

Physical Presence Test

If you meet either of these tests you may be eligible to claim the exclusion amount in full or up to the limit of your income.

Additionally, if you have housing expenses including rent, utilities, insurance or taxes, a portion may be deductible.

If you are a U.S. citizen or Green Card Holder working abroad, you may pay taxes directly or have taxes withheld on your income. Depending on the tax treaties, the taxes paid on foreign sourced income could be credited against U.S. tax liability. These Foreign Tax Credits need not be used entirely every year but can be carried over year for up to 10 years.

Interest on unpaid taxes is calculated starting with the due date of tax return until payment is made in full. The Interest rate is determined every three months and is subject to change.

The Late Payment Penalty is calculated at the rate of 0.5 percent per month or part of the month from the due date of tax return until payment is made in full. The Late Payment Penalty is not to exceed 25 percent of the unpaid taxes.